Published 12:29 pm, Thursday, February 4, 2016

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Oil prices have been plummeting in recent months and so could sales tax revenue should parts of Texas experience an economic slowdown. Energy production had kept the state's economy humming in recent years. But state Comptroller Glenn Hegar has warned that economic activity may not expand statewide as quickly as in years past. less

Oil prices have been plummeting in recent months and so could sales tax revenue should parts of Texas experience an economic slowdown. Energy production had kept the state's economy humming in recent years. ... more

Even as Texas oil and natural gas producers endured a painful crash in crude prices, they still managed to help fill the state’s coffers.

In fiscal year 2015, the state’s oil and gas industry paid $13.8 billion in state and local taxes and state royalties. That’s the second highest amount collected from the industry in the state’s history, according to the Texas Oil & Gas Association.

In a conference call with media discussing the industry’s economic outlook, association President Todd Staples stated, “In spite of global economic challenges, all Texans continue to benefit from tax and royalty revenue paid by the oil and natural gas industry. State and local revenue from the oil and natural gas industry directly funds our schools, roads, first responders and essential public services.”

On a per-job basis, the state’s oil and gas industry paid seven times more in terms of taxes and royalties than the rest of the private sector, he said.

Even so, the decline in oil prices and resulting drop in activity and employment “reminds us that this state and local revenue isn’t guaranteed.”

In such challenging times, Texas needs to stay the regulatory course, he said.

“Texas has fostered a robust oil and natural gas industry by embracing sensible and predictable regulations that are protecting the environment and encouraging investment in our state. Staying the course with sound, science-based policy will ensure investment dollars and jobs continue to come to Texas.”

Asked about the emphasis on sensible and predictable regulations, he said that “our goal is to have in place science-based regulations that protect the environment and support economic growth.

“If you have regulatory certainty, Texas will be the first place oil dollars go back to work,” Staples said.

He expressed concern that if low prices continue into next year and state revenues continue to decline, the Texas Legislature will make cuts across the board, impacting the Railroad Commission, which oversees the industry. Staples said he doesn’t want legislators to be overzealous in wielding the budget ax.

“Regulatory agencies need capacity in good times and in bad in order to respond to consumers,” he said.

“Efficiency is the goal, and we want agencies to have the right amount of funding to do their job,” he said.

While the state’s upstream sector is suffering, overall the Texas energy industry is doing well, from refineries to petrochemicals, Staples said. He said that Texas is home to the nation’s largest pipeline infrastructure and 29 percent of the nation’s refining capacity. Liquefied natural gas and even crude oil are being shipped from the state’s ports at Houston and Corpus Christi.

“Even in these challenging times, all 10 sectors of the state’s energy industry are contributing to our economy and the nation’s energy security,” he said.

“All Texans benefit from oil and natural gas tax revenue, whether they live in an energy-producing area or not,” said Staples, citing examples such as the state’s recent multi-billion dollar investments in water and transportation infrastructure projects, funded with oil and natural gas tax revenue.

Staples also cited the more-than $500 million the industry contributes to the state’s Permanent School Fund, which supports K-12 public schools and, at $34.5 billion, is the second largest education endowment in the United States. And, the state’s rainy day fund is funded almost exclusively by oil and natural gas severance taxes, he said.

Texas independent school districts received $1.9 billion in oil and natural gas mineral property tax revenue in fiscal year 2015. Midland and Ector County ISDs were both in the top 10 in amount of revenues received. Counties received $632 million in oil and natural gas mineral property tax revenue. Ector County received $14.3 million, 32.7 percent of its tax base; Martin County received $13 million, 88 percent of its tax base, and Midland County received $7 million, 25.7 percent of its tax base.

In his comments, Staples acknowledged the oil industry has had a rough start to 2016. He was asked about that rough start and if he was concerned there could be a return of the 1980s when oil prices fell to single digits.

He pointed out that the Texas rig count in January 2015 was 695 rigs; in January 2016 it was 281 rigs, down 60 percent.

“Whether we go back to previous eras, I think it would be difficult to say. Look at various nations around the world whose budgets are wrapped around their oil industries,” he said. The national oil companies in those countries may be operating below cost and won’t have the capital to invest in new capacity, he said.

“If those countries can’t reinvest in new capacity because of other requirements, the U.S. is in a better position. Right now, supplies are greater than world demand can absorb. Technology has been beneficial to all consumers and that’s why prices are low. Technology identified the shales, and because of technology like horizontal drilling and hydraulic fracturing we were able to recover reserves we thought were unreachable and that’s why the U.S. is the world’s No. 1 producer of oil and natural gas,” Staples said.

Ending the 40-year-old ban on exporting U.S.-produced crude is “a significant change in policy that puts our producers on a level playing field,” Staples said.

Exporting crude will give U.S. producers the opportunity to ensure resource development without artificial barriers that keep U.S. companies from competing around the globe.

Staples also called for sensible development of renewable energy, explaining that association members have an “all of the above” mentality. But that development should be done without artificial demand or government mandates in which the government picks energy winners and losers, which “only adds to consumer costs,” he said.

Renewables will play a role in meeting energy demand, and technological advances will continue in the field, Staples said. “For the short term, oil and gas will, without question, be the reason we have energy security and economic growth.”